Understanding The Most Poorly Funded School System in America: Illinois

By design, Illinois places an outsized reliance on revenue from local property taxes to fund schools. That has led to dramatic increases in property taxes across the state while also creating a worst in the nation gap in funding between rich and poor districts.

With Springfield mired in epic gridlock, there’s still one thing Republicans and Democrats seem to agree on: the way Illinois divvies up money for schools is unfair, inadequate, outdated, enormously complicated and badly in need of reform.

But consensus breaks down rapidly when it comes to constructing any fix. The reason is as simple as it is vexing.

By design, Illinois leaders long ago constructed a school funding system that relies on local property taxes for the lion’s share of resources. It’s been two decades since the last significant attempt to alter the dynamic, and that hit a dead end in the legislature over Republican resistance to raising the state income tax rate from 3 percent to 3.75 percent.

The lament back then didn’t sound all that different from the lament today, with then-state Rep. Douglas Scott warning during one 1997 debate on the House floor that an overhaul of school funding was way past due.

“We have poorer districts because we rely so heavily on the property taxes,” the Rockford Democrat complained. “But until we address this, we’re just going to keep coming back here every two, three, four or five years with these temporary stopgap programs.”

In the intervening years, as the state’s financial position deteriorated, the income tax rate has both ballooned and shrunk. Ironically, though, it now sits at the same 3.75 percent rate that lawmakers were loath to impose 20 years ago in what was billed as a swap to trade higher income taxes for both more school aid and relief for beleaguered property taxpayers.

Now, with an explosion of pension debt and a huge backlog of unpaid bills to state vendors, tax swap notions seem a distant pipe dream. And the result is nobody’s happy.

Not poorer suburban and Downstate districts with scanty property tax wealth to tap. Not wealthier districts where schools are flush but local tax bills have shot through the roof to pay for it. Not Chicago, which lies somewhere in between but must juggle both special funding rules and the added expense of serving the needs of a student body from largely low-income families.

In sum, Illinois is left with an education system that has the widest spending gap in the nation between wealthy and poor districts, nearly 20 percent, according to a 2015 report from the Education Trust, a Washington-based non-profit advocacy group.

“The overwhelming finding is that we really have one of the most inequitable and disparate funding systems in the nation,” said Stephanie Schmitz Bechteler, executive director of the research and policy center at the Chicago Urban League.

“What you would hope for is that the students in need of more services and supports would receive the most. … What often happens in Illinois is that the schools with the highest number of students coming from the most low income families often receive the lowest.”

Compounding the frustration is that the mechanisms and rules governing the distribution of Illinois education funds can seem as streamlined and straightforward as something designed by Rube Goldberg, the late cartoonist famed for drawing designs for machines that performed the simplest tasks in the most convoluted ways.

Case in point is the formula for general state aid, the basic building block for school funding. Under state law, the formula is designed around a minimum dollar amount that most school districts in the state should spend per student per year.

That minimum, referred to in education jargon as the foundation level, is currently set at $6,119—a target that was initially set for 2010. But for several years the cash starved state didn’t even have enough funds to hit that mark. What’s more, the panel charged with making recommendations to lawmakers about updating the foundation benchmark says the current funding level is not only seven years out of date but woefully inadequate at that.

That panel, the Education Funding Advisory Board, says by its calculations the current foundation level should be 50 percent greater than it is now at $9,204 per student.

“What we actually fund schools at in the state of Illinois is less than adequate,” said Sylvia Puente, chair of the funding board. “They haven’t even met their statutory obligation much less the EFAB recommendation.”

Calculations for the foundation level appear to start out simple enough, but then veer off into a hodgepodge of special wrinkles.

There are more than 850 traditional school districts in the state as well as dozens of other alternative and lab schools, and two-thirds of them receive general state aid under a complicated formula aimed at adding up how much local property taxpayers can kick in to meet the $6,119 goal. The state then, for the most part, picks up the rest.

However, there are still rules aimed at insuring districts get at least a slice of state aid even when the school revenue they derive from the property exceeds the foundation funding goal.

If a district already has property wealth that generates tax revenue between $5,690 and $10,708 per student, the state chips in between $306 to $428 per student. And if a district has more than $10,708 in tax revenue per student, then the state contributes $218-a-head.

This year, the state is spending more than $5 billion on general state aid, an amount that includes $1.76 billion for a supplemental grant awarded to districts based on their concentration of low-income students and does not take local property wealth into account.

General aid underpins school funding, but state and federal taxpayers underwrite Illinois classrooms in other significant ways as well.

Schools also get money from the state for what are known as “mandated categoricals,” per pupil grants tied to specific purposes such as special education, transportation and free lunch programs for low income students.

Such expenditures, which collectively cost Illinois $1.57 billion this year, underscore the complexity of the state’s funding models, according to some education experts.

“There are lots of different competing line items and we want to really focus those and be efficient,” said Jessica Handy, government affairs director for Stand for Children Illinois, an advocacy group with ties to Republican Gov. Bruce Rauner.

Handy said funding issues now facing Illinois schools overlap with problems plaguing pension funds for Chicago as well as suburban and Downstate teachers that are both severely starved of resources.

The state, as well as city schools, for decades diverted investments away from those funds to cover other needs, in effect borrowing from pensioners to avoid tax hikes. Now, however, the state has been left with a whopping pension debt to pay and that is sapping resources that otherwise could be devoted to classrooms.

“These are all education dollars and it makes sense to have a holistic conversation on all of them when we’re talking about fighting the inequity,” she said.

In Chicago, Mayor Rahm Emanuel has been particularly outspoken about how city taxpayers are required to underwrite pension costs for teachers in Chicago while also kicking in to help cover the pension tab for suburban and Downstate teachers. Meanwhile, the state covers pension money for teachers across most of Illinois except Chicago.

If that seems unfair to the city’s schools, then it may also be important to revisit the way Chicago gets treated by the state as it dispenses that big pot of grant money for the mandated categoricals.

The city’s share of that money—worth $478 million last year—is determined under a formula drawn up in 1995 when the Chicago Public Schools had far more students than it does today. If Chicago had to abide by the same formula as other districts in the state, city schools would have been in line to receive only $226 million in categorical grants, according to the Illinois State Board of Education.

While the state overall does give more money to needy districts compared to wealthy districts, the resource gap still means that districts with considerable wealth still have far more to spend on their students than those less well off.

Efforts to close that gap have fallen short for years. Indeed, the basic funding structure for Illinois schools has been in place since shortly after the failure of that 1997 overhaul plan that was pushed by then-Gov. Jim Edgar, a Republican.

The state income tax hike he advocated at the time would have generated $1.5 billion in new revenue, most of it for property tax relief but $600 million for enhanced school spending.

It died when Edgar’s fellow Republicans, who then controlled the state Senate, refused to allow a vote. They argued the state’s coffers at the time were flush so an income tax hike was unnecessary.

That clearly is no longer the case. And in the absence of any new revenue streams for education, the only way to funnel more state aid to poor schools would be to siphon it from wealthier ones—a political non-starter.

“You’re taking money away from some but still not fixing the problem because the $6,000 (foundation level) is not enough,” said Matthew Rodriguez, president of the Illinois PTA which represents parents and teachers across the state.

“When you present that to parents and teachers, they get outraged,” Rodriguez said. “You can imagine telling me that my first grader is going to lose programs and there will be teacher layoffs when we already pay high property taxes. Everybody in my community is going to be very upset.”

Because of an editing error, a graphic in this story initially reflected the wrong amount for recommended per-pupil spending for 2010. The graphic has been updated to reflect that the correct amount was $7,388.

Author(s)

Katie Drews is a reporter with the Better Government Association's investigative staff. She is tasked with, among other things, investigating and exposing problems in municipal governments throughout Illinois.

Bob Secter is senior editor for the BGA. He has previously served as a political reporter and Political Editor of The Chicago Tribune, a national, Southeast Asian and congressional correspondent for the Los Angeles Times, and the Springfield bureau chief for the now defunct Chicago Daily News.